NEW YORK (
) -- Although still a comfortable distance away from the more than $1,200-per-ounce highs at the end of last year, gold bullion and gold miners remain attractive investment options for investors looking for strong plays against a weakening dollar, inflation and general economic uncertainty.
Finding the most efficient way to play the yellow metal, however, can prove to be a time consuming and overwhelming task.
Thanks to mutual funds and ETFs investors are now provided with a vast number of options, all of which can satisfy even the most ravenous craving for precious metals.
Looking for an ETF play on gold miners? Today, investors can choose whether they want to play established operations like those in the
Market Vectors Gold Miners ETF
or smaller, more volatile companies found in the
Market Vectors Junior Gold Miners ETF
The number of mutual funds that expose investors to gold miners is much greater.
Given the staggering number of options on the table, it is easy for investors to become overwhelmed. Therefore, to relieve some of this confusion, I will provide my personal picks for the best gold miner mutual funds and ETFs. This list contains three gold miner funds that I feel are the strongest, cheapest, and most liquid options available in the gold arena.
Fidelity Select Gold Fund
Of the gold mutual fund options currently available, few offer as low a fee as the Fidelity Select Gold Fund, whose 0.86% expense ratio has likely aided in the fund's ability to accumulate over $3 billion in assets since its inception 25 years ago.
The five top equity positions of FSAGX are akin to a who's who of the gold mining industry. The top holdings include
and Newcrest Mining. Together, these positions account for 41% of the fund's portfolio.
FSAGX, however, offers more than just exposure to gold miners. Over 7% of its portfolio is allocated to physical gold bullion, giving investors some exposure to the commodity itself.
In the past three months through March 12, FSAGX has fallen 3%
Tocqueville Gold Fund
Launched in 1998, TGLDX is another mutual fund option for investors looking for gold mining exposure. Over the past three-month period through March 12, TGLDX has outperformed FSAGX, with a 1.8% gain.
TGLDX's strength stems from its fund manager, John Hathaway, who has managed the fund since its inception. Under his stewardship, the portfolio has returned 22.8% annualized over the past 10 years compared to FSAGX's 18.3% annualized run over the same period.
Currently, the fund's top equity positions include
Like FSAGX, TGLDX provides investors with access to physical bullion, though on a larger scale, with physical gold coins its largest position at nearly 10% of its total portfolio.
Investors should be aware this fund carries a significantly higher expense ratio that its Fidelity competitor, with a charge of 1.50%.
Market Vectors Gold Miners ETF
While TGLDX and FSAGX are fine choices for accessing the gold market, investors seeking the transparency, liquidity and low costs that come with owning ETFs should look no further than GDX.
Van Eck, the company behind GDX, has blazed a trail within the ETF ring by offering a number of industry firsts. Among other things, GDX is the first ETF that is exclusively focused on the gold mining industry. Using this instrument, investors can gain access to a broad selection of the largest gold miners.
GDX's top holdings include Barrick Gold, Goldcorp, Newmont Mining, AngloGold Ashanti and
. Together, these five positions account for half of the fund's total portfolio.
Unlike the two mutual fund offerings, GDX does not hold any physical gold in its underlying portfolio. This has caused the fund to underperform over the past three months agains its more diversified competitors, as it dipped 5%.
This lag can be mitigated, however, by combining exposure to GDX with the better performing GDXJ (down 0.5% in the past three months) and one of the trio of physical gold ETFs (all down about 2%).
A combination of GDX, GDXJ and the
SPDR Gold Trust
iShares COMEX Gold Trust Shares
ETFS Physical Swiss Gold Shares
, could deliver a return equal to or better than FSAGX.
Any mix of those ETFs could not beat the return of Hathaway's TGLDX in the past three months or the past year, however. Investors who are unwilling to do their homework in this sector may do better with a manager who has a solid track record going back more than a decade.
-- Written by Don Dion in Williamstown, Mass.
At the time of publication, Dion owned IAU.
Don Dion is president and founder of
, a fee-based investment advisory firm to affluent individuals, families and nonprofit organizations, where he is responsible for setting investment policy, creating custom portfolios and overseeing the performance of client accounts. Founded in 1996 and based in Williamstown, Mass., Dion Money Management manages assets for clients in 49 states and 11 countries. Dion is a licensed attorney in Massachusetts and Maine and has more than 25 years' experience working in the financial markets, having founded and run two publicly traded companies before establishing Dion Money Management.
Dion also is publisher of the Fidelity Independent Adviser family of newsletters, which provides to a broad range of investors his commentary on the financial markets, with a specific emphasis on mutual funds and exchange-traded funds. With more than 100,000 subscribers in the U.S. and 29 other countries, Fidelity Independent Adviser publishes six monthly newsletters and three weekly newsletters. Its flagship publication, Fidelity Independent Adviser, has been published monthly for 11 years and reaches 40,000 subscribers.